Do you have a payday loan history on your credit report and are concerned that it will make it challenging to obtain a mortgage?
You may have been told otherwise, but getting a mortgage after payday loans is possible. However, it will most likely be difficult, and you will have fewer options.
As with any other mortgage application, your specific situation will influence your chances of acceptance. Lenders consider your income, whether you have any credit card issues and the size of your deposits.
Most high street banks don't generally lend mortgages to people who have previously taken out a payday loan. However, it does not imply that no one will accept your application.
Max Schwartzapfel from Schwartzapfel Lawyers, said "Just the fact that you have payday loan history isn't going to stop you from getting a mortgage. It may however affect the amount of choices you have as far as looking for lenders. It may also have some effect on how much any particular lender is willing to lend you. Though as with most things, lenders are not a monolith when it comes to policy around payday loans. Some lenders may be more willing to work with you than others, especially if you've paid back your loan and aren't a frequent borrower."
There are lenders who assist people in situations like this. They are more likely to examine your situation before deciding rather than reject you.
They will want to know when you took out the payday loan, how much you borrowed, how quickly you paid it back, and how many past payday loans you have had. The older the loan, the more likely you will be accepted.
Getting payday loans on their own does not harm your credit rating and is not a bad credit issue if you pay them on time. Most lenders consider a history of payday loans a red flag, making acceptance difficult.
Most lenders assume that because you previously relied on payday loans to cover your daily expenses, you will struggle to make monthly mortgage payments.
If you have poor credit and a history of payday loans on your record, it will be challenging to obtain a mortgage, but it's possible. In this case, experts recommend that you consult a mortgage broker who can help you locate a lender who will accept your mortgage application.
The more payday loans you have on your credit report, the more difficult it will be to get approved for a mortgage. Taking out multiple payday loans makes the mortgage lender believe you are more likely to default on your mortgage payments.
However, your chances are better if you took out multiple payday loans a long ago. But it will be more challenging for you if you recently took them out.
If you've used payday loans, you may face certain restrictions and requirements while getting a mortgage.
Lorien Strydom from Financer.com said, "Payday loans are typically considered to be high-risk borrowing, so lenders will typically charge a higher interest rate for borrowers with this type of debt. Additionally, the lender may require a larger down payment or impose other restrictions on the loan."
Typically, people with a payday loan history face the following circumstances:
Your credit score and history will reveal any loans or missed payments you have made in the last six years. The older the date, the less it will affect your mortgage application.
If your most recent payday loan was more than six years ago and you have no other credit issues, you will have many more options than if you have a lot of recent ones in your credit history.
The time you should wait before applying for a mortgage should also depend on the loan-to-value (LTV) ratio, which compares the mortgage amount to the appraised value of the property. The greater your equity/deposit, the greater your chances of approval, even if you have a payday loan history.
Yes, you can apply, but your lender will probably reject it. Simply put, the unpaid debt will demonstrate how you failed to make your last loan payment and will fail to make your mortgage payments as well.
Pay off your payday loan first and wait a while before applying for a mortgage. Numerous options, including payday loan settlement and consolidation, are available if you are in debt and unable to repay your payday loan.
Deb settlement and consolidation are excellent options for those unable to repay their payday loans.
It can be disconcerting to be rejected by a mortgage lender. In this situation, deciding what to do next can be difficult.
Applying for another mortgage may appear to be the next logical step, but too many unsuccessful mortgage applications can harm your credit report, which is the last thing you want.
If a mortgage lender has denied your mortgage application, speak with a specialist mortgage broker who can evaluate all of your options and assist you in finding the best mortgage lender for you.